Jack Townsend offers this blog on Federal Tax Crimes principally for tax professionals and tax students. It is not directed to lay readers -- such as persons who are potentially subject to civil and criminal tax or related consequences. LAY READERS SHOULD READ THE PAGE IN THE RIGHT HAND COLUMN TITLED LAY READER LIMITATIONS. Thank you.

Wednesday, September 22, 2010

Yet Another UBS Client Bites the Dust

On September 21, 2010, Jules Robbins, an 84 year old retired watch distributor, was sentenced to one year probation for hiding his Swiss accounts that held, at their peak, almost $42MM. From the USAO SDNY Press Release:

In 2000, ROBBINS used the services of a U.S.-educated Swiss attorney to set up a sham Hong Kong corporation which was listed as the holder of his account and to serve as the nominal head of the corporation. In fact, UBS internal documents specified that ROBBINS wanted to be "100% in charge" of investment decisions concerning his UBS accounts. ROBBINS also took numerous steps to conceal his interest in these accounts from the IRS, including having his Swiss attorney receive all of the correspondence relating to the account at his law firm in Switzerland. As of December 31, 2007, ROBBINS' UBS accounts collectively contained almost $42 million.

ROBBINS, 84, of Jericho, New York, pled guilty on April 15, 2010, to five counts of subscribing to false federal income tax returns. As part of his plea agreement with the Government, ROBBINS paid a civil FBAR penalty of $20,833,345, an amount equal to 50 percent of the highest value of his UBS accounts as of December 31 for the years in which he failed to file FBARs.

According to news reports, Robbins' attorney argued in support of a light sentence that Robbins, the octogenarian, was in fragile health and the FBAR penalty is 80% of his net worth (meaning that his remaining 20% would be about $5MM. From the Bloomberg report, Robbins apologized and "asked the judge for mercy, breaking down several times as he told Holwell of the 'shame, aggravation and sleepless nights during the past many months.'"

3 comments:

The Forbes blog by Janet Novack implies he did a quiet disclosure..."Then came 2008, not a good year for Robbins. The market crashed....Robbins hired lawyers, filed back FBARs, sent $1 million to the IRS and began putting together accurate amended returns for 2002 through 2007." Anybody have the Defendant's Sentencing Memorandum?

Worthy of note, beginning on the bottom of page 15 (out of 73), it states..."In his guilty plea before Magistrate Judge Ellis, Mr. Robbins took full responsibility for his conduct. More than that, however, Mr. Robbins voluntarily took major steps to address his conduct responsibly several months before learning of any investigation against him. In particular, before government agents served grand jury subpoenas on Mr. Robbins and his accountants, he disclosed his offshore account to the Internal Revenue Service ("IRS"). Mr Robbins made this disclosure by filing with the IRS full and accurate amended returns reflecting the existence of the UBS account and the income derived therefrom."

I have read the portions of the sentencing memorandum you cite and the surrounding portions. I think there is more there than you suggest.

The claim is that he made the voluntary disclosure months before learning of any investigation against him. It appears that he attempted a quiet voluntary disclosure in July 2009 which was after the special voluntary disclosure was announced in March -- and that voluntary disclosure required a noisy disclosure pursuant to the steps outlined for the program. He could well have been trying / hoping to slip through without the penalties required by the program but with its major benefit of no criminal prosecution through the office of the quiet disclosure. I dare say that most practitioners at that time would have viewed that gambit as a highly risky adventure.

Moreover, focusing on the words his lawyers used, they say that: "Predictably, on October 22, 2009, following the submission of the amended returns and the $1 million check, federal and state agents served grand jury subpoenas on Mr. Robbins and his accountants." If it were really predictable, why did he not get into the special voluntary disclosure program when it was first announced or as soon as possible thereafter. Assuming no other problems in his disclosure, had he attempted to join the program and take his light punishment in the program, he could have avoided criminal prosecution.

So, bottom line, I think the Government prosecuted for all the right reasons. And, to reprise the thought, I had a guy who had done a true voluntary disclosure (both amended returns and delinquent FBARs) many months before the program was announced and he probably was under the wire by the time. Nevertheless, from an abundance of caution and concern, he chose to join the voluntary disclosure program and suffer the civil penalties that he may never have attracted at all in order to assure himself that his criminal problem was solved.

The Robbins case is different, for it appears to me that he attempted a quiet disclosure when the announced program was available. If that is true, he chose to take a risk and suffered the consequence when it came home to roost.

I don't think this is worth a separate blog, other than as a precautionary lesson to taxpayers and practitioners.

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